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As you probably know, 90% of startups fail. E-commerce is not an exception. Here is a deep analysis of the top reasons why e-commerce businesses fail, and a solution to the most common mistakes and causes of failure.
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So you're thinking about starting a new e-commerce business. It’s your first time and your nervous for many reasons. Sorry to say this but you will make mistakes, and everything will not go your way. But there is a way to minimize the number of errors you make, so you don’t have a failed e-commerce company.
Here’s a fun (but sobering) fact: recent research shows that around 90% of new startups fail. That’s a lot. If you’re starting your own online business, or you already run one, that fact might send a shiver down your spine.
But fear not! While you can learn a lot from a successful business, you can learn a whole lot more from failure. I’ve done some digging and highlighted the top 15 reasons why e-commerce businesses fail, so you can avoid those mistakes and get your business in that successful 10%.
You’ve got a great product. You’re proud of it. You’ve done your market research, you know your stuff… but your product listing is a grainy photo with some poorly written copy. It looks like something you’d see on eBay or a dodgy Amazon vendor’s site, not a successful e-commerce business. You have to be mindful that the eyes of the world are on you — and there is no excuse for poor English (hello, Grammarly). Make sure that you don’t make a subpar impression and devalue your brand because of a poor launch.
The first taste is with the eyes, that’s what my grandma always says. And she’s right! If your product image looks like something taken on a camera phone from 2005 by a ten-year-old, your customer won’t be impressed. Take the time to teach yourself how to take good product photos to dazzle your audience.
And you shouldn’t just dazzle them with pictures either. Your product description needs to describe your item clearly, but at the same time be engaging enough to have it resonate with your audience. Use bullet points to list the benefits of your goods in a positive light, as Amazon have done for their Kindle Paperwhite:
Clear advantages to the customer are blended with product specifications, all in an easy-to-read format. Sometimes simplicity trumps complex, flowery language. Think about how your UI affects the customer experience.
So, you want to buy this summer dress? Great! Just click Add To Basket. Now click on Checkout. Now choose your delivery option. Then enter your home address, your partner’s home address, your hopes and dreams and a 1000-word essay on your family history since they arrived on the Mayflower...
Okay, so I’m exaggerating a little. But while it might seem obvious, but there are still lots of e-commerce businesses who neglect to make their checkout process as simple as possible — to their detriment. In fact, it has been described as the number one reason why consumers abandon their shopping cart before paying. Ensuring that your checkout procedure is as painless and straightforward as possible stops customers dropping out of your marketing funnel at the last minute. It’s a simple change that is worth getting right.
You should also think about employing checkout trust signals. Consumers can be skeptical of brand new websites and unknown brands, so partner with some well-known payment facilitators (PayFacs) to reassure. The number one goal here is repeat business, to capture the data that you need, give the customer a great experience, and let them get on with their day.
I saw a great deal on a blender the other day. In fact, it was a steal. But when I got to the checkout, I found out the postage and packaging was almost a third of the product cost itself! So I decided not to buy. That meant no sale for the seller, and no fruit smoothie for me in the morning. If I had known beforehand the full price including P&P, I might have been more easily swayed…
The fact is, you need to manage your customer’s expectations. Hidden fees are a big contributor to cart abandonment. Ensuring that what your consumer sees is what they get is crucial, so don’t hide any unexpected costs until the last minute. There are lots of free or relatively cheap shipping calculator widgets out there, so be sure to include one in your store.
Same goes for misleading ads — you will undo all your hard work if you send the consumer to an offer or a landing page that isn’t aligned with the ad they clicked. Never play around with your customers’ trust like that — it won’t end well for you.
It does not matter how successful your online business may be there will be returns. Not having an understandable and accessible to access return policy will make your business look none credible. You can not expect anyone to buy from you or anyone else if they do not know what the return policy is or where to find it. Make sure to have it easily identifiable under each product on your site and have it emailed with their receipt if they choose to buy from you. Having one will also help you if you are dealing with people who love buying items for a small amount of time then eventually try to send it back and get a full refund. If you have identified with them where the return policy is and have it emailed to them if they try to return a product in a time window that is outside your policy it will protect you if they resort to any legal action against you.
As well all know before you even began a business, no matter what the type, you must have money. You’ll need to have the right amount of cash flow to fund your business. You need, or else your company will cease to exist very quickly. Be sure not to overspend in any phase of your e-commerce business from the marketing to how much software is needed to run everything smoothly. It is better to underspend and learn from your mistakes while having funds to adjust then overspending and not having any at all.
In terms of inventory, if you overorder, it will take a long time for your products to sell and even worse if you have a supplier that takes a long time fulfilling an order and shipping, your customer won’t be pleased. It's better to test a smaller amount of inventory to gauge how much demand your product will have and adjust the order accordingly. With suppliers, it is best to order from a few and figure out which you like best.
It’s your cousin’s birthday tomorrow, and you forgot to get them something. But you’re too busy to go into a store, and you’re traveling all day today. But it’s okay! You can just order it on your mobile. But that website that worked great on your computer at home doesn’t translate so well to your mobile device...so you’ll just go to a site that does.
62% of smartphone users have purchased something on their mobile device in the last six months. With figures like that, the emphasis on creating a responsive e-commerce store that works across all devices is vital. Thankfully, the tech to help get you there is relatively easy these days — there are no excuses for a poor mobile experience in 2018.
Get to know the nuts and bolts of what good mobile UX looks like for your store. Using Shopify's store builder means that you automatically get a store that’s optimized for mobile devices, whereas anyone working with a more custom system like Drupal may have to put in some extra development time to get things just right. If you have gone with a shopping app as well, make sure that it’s been robustly tested before the big launch.
Either way, it’s worth taking the time to test your store yourself on a variety of devices, from laptops to tablets — with differing web speeds, and from different locations and IP addresses around the world. If a customer finds your site difficult to navigate, it’s easy for them to go elsewhere. It’s up to you to make sure they don’t need to.
It’s a hot, sunny day, and you’ve made the perfect lemonade. It’s the ideal sparkling solution for a warm summer’s day. But you’re selling it on an empty street, and no-one knows you’re there. That’s why you need to ramp up your online marketing strategy. Your plan should include paid, owned and earned media, and consist of useful and relevant content.
Think about your audience. Who are they? What do they want from your brand? What social media platforms do they use? These are all questions you need to keep in mind when you are formulating your marketing strategy.
Even the smallest of startups will need to invest in paid media at some point. Social ads are a great way of driving traffic to your online store and are relatively cheap compared with other forms of paid advertisements. With an estimated 1.39 billion active Facebook users every month, social ads are the cornerstone of a successful online business.
Juicero. Yik Yak. Beepi. Don’t let your online business go the way of these startups. Learn from the mistakes of others. Simple things like optimizing your site for mobile devices and making your checkout process quick and easy can be the difference between bombing and succeeding. Do your research and create an outstanding marketing strategy that will wow your prospective customers.
Having SEO on your e-commerce site may seem like something you’d apply later but its best to utilize straight from the start. You want to establish what are your most important keywords. At the bare minimum, you want to have them in your title tags for your pages with relevant search terms that directly pertain to what you’re selling. It’s best to go for the highest volume, lowest competition keywords to give yourself the best chance of ranking in search. If that seems a little advanced and need more help check out this article by Neil Patel on the ultimate guide to SEO for an e-commerce site. If you decide on getting professional help, we recommend hiring a consultant that specializes in SEO or hire a virtual assistant on Upwork.
People think that all you have to do is pick any product and automatically because it sold online that you will become a thriving e-commerce business owner. That would be great if this were a dream, but unfortunately, you have to wake up and realize you can not just bring a product into the market place and not test first. You have to do market research through software and competitor analysis to have a successful outcome. If your thinking of selling on Amazon I recommend a popular software called Jungle Scout. Jungle scout is the top rated and most used software for professional amazon sellers. With this software, you will be able to find solutions for tracking products, exploring product opportunities, monitor competitor sale data, and be able to calculate just how much it’ll cost for you to send that product to Amazon. Using software like this will drastically cut down the chances of having unsuccessful products while also being able to know how much it’ll take you to get your eCommerce business off the ground.
For more information on how to use Jungle scout, and even how to find a winning product in 10 minutes, check out this.
You don’t want to get into a niche where everyone is trying to sell the same products and being too generic. Selling dog collars are not going to get you anywhere. But if your niche down into military dog collars you might have a better chance. But the overall sense is that when you go into a niche, don’t just pick a generic everyday product like dog collars and fitness watches that everyone online is trying to sell. You have to be able to go into a niche and niche further down if you hope to gain any success. Besides, you don’t want to sell products that have widely known brand name competitors like Nike and Adidas. Selling gym apparel, sneakers, and other related products that are brand dominated in those niches would be out of the question.
We all know those people that, when something goes wrong in their plans, they automatically give up. It is the same with e-commerce. You feel as if you’ve done everything right the research, competitor analysis and so on. But for some reason, you decide to shut it down and give up just because the product you choose is not selling as much as you thought it would. There are things in life that do not go your way even if you think you’ve done everything right but giving up because of one failure in entrepreneurship, does not help at all. You want to at least minimum try out 3-5 products before calling it quits. You will learn from your previous failures, but if you quit after just one product, you will never know what could have been.
In any business, not just e-commerce, you want to have a good website, business cards, and a catchy brand name. But those elements will not keep your business running in the long term. You have to develop a robust backend as well because that is what will sustain your business. Your customers are the ones who will keep your business alive so keep them in consideration when it comes to how they interact with your site and their experience from doing so. Your website needs to offer the functionality that makes it run more efficiently.
Just like the checkout process, you want to have your site easy on the eyes and easy to navigate. Some of the most critical navigation elements in e-commerce are to search for shoppers with specific tastes, labels (be straightforward) and visuals (they drive navigation more than text). Not having good site navigation will completely turn people off to what could have been potential customers.
Your customer wants to have everything easy, convenient, and intuitive, from browsing the website finding products and everything in between.
Take the company Norwegian Rain as an example.
As seen above you can automatically tell what the company is selling. There is no cluster on the site such as annoying animations. The cart is easily identifiable in the top left-hand corner. You don’t even have to use a mobile phone to tell the site would be easily optimized for mobile devices. Most importantly there is no doubt a first-time visitor would be able to navigate the site quickly and gain any information or product they desire. That aligns with the checkout process as previously stated. Make it easy for your potential customer and they’ll either purchase easily, find more information about your startup easily, or at the least know fast if they want to be associated with your company or entirely leave.
There is almost nothing more annoying to a potential consumer than going to a site to determine if they’re going to buy and a pop up appears only after a few seconds of them being on a website. There is nothing wrong with having a popup on your site, but there is a time and a place for it. When you are just looking to see if you want to purchase from a site an immediate popup may annoy your potential customer one having ones, where the exit button seems to be nowhere in sight, will ultimately turn them off and they will leave your site more times than not.
If you are going to utilize a popup, it is best to have it appear after a few minutes from when a user is on your site. Even better yet, having it activated when a particular action is taken on your site like when someone adds something to their cart, which will also encourage them to purchase right there, especially if it includes something enticing like a coupon or a free add on to what they are already looking to buy.
Going off annoying pop-ups what will annoy potential customers, even more, is requiring them to register after only a few moments upon arriving at your site. Expecting anyone to have to register or they’ll not be able to access your site will cause most to leave. You wouldn’t ask someone out only after meeting them for a few minutes, would you? Of course not and it is the same as your site. If you want someone to commit to your site and even become a fan they have to get to know your company and products. That will determine whether or not they will not like your site and leave, make a one time purchase, or become a lifelong repeating customer.
No matter how big or small your company you will not go very far if you do not have customer service. You are selling a product online, and people will have questions guaranteed, and if you can not provide an answer or have a team that can, they will move on to your competitors. Ten to fifteen years ago if you had terrible customer service the most a person could do is write a letter of complaint, you’d get a refund. Now in this day in age with everyone having a computer in their pocket all they would have to do is share their feelings online where the whole world can see it then boom you’ve got yourself a fire you better get out quick and hope it doesn’t spread fast. In the aspect survey of 2017, 54% of people said they stopped doing business with a company because of a bad experience, and that number is even higher with millennials of upwards 61%.
Fab was one of the fastest growing eCommerce stores in history and worth over 1 billion before they crashed. What they got wrong was pivoting. A pivot generally means that a business is looking to find a fresh perspective and vision to prevent themselves from growing stagnant. A pivot allows a company to go in a new direction when the opportunity is clear, or their current strategy is not doing so well. Pivoting is not bad, but it is essential to know when to do so.
Fab had pivoted before as they were a social network for gay people but weren't seeing many users. So they moved on to having a store when they realized there was a market for users who wanted an easy and accessible way to purchase designer wear.
Their ultimate downfall was that they pivoted again to become the designer alternative to Amazon and Ikea. They were already a successful company but created another problem trying to move on to a new business. As a wise person once said, “if it isn't broke, don't fix it.” It’s normal for a struggling company to pivot. However as Fab showed, they just pivoted just for the sake of it.
Tutorspace was started in 2011 and was a platform for parents to find tutors for their children. Just two years later they had made $1.8 million in estimated revenue. But that all came to a halt when Google decided to change its SEO algorithm. Generally for any business that does not hinder it too badly as they can adjust and have other forms of acquiring customers than just SEO alone. The same, unfortunately, could not be said for Tutorspace. They made the mistake of only relying on one way to acquire customers and just after years of business they ceased to exist.
Entrepreneurs should invest half of their marketing into a highly risky strategy, and the other half in a proven consistent approach, with a lower return on investment. If you want to learn more, apply the barbell strategy. Putting all your eggs in one basket will never plan out well in the end. So learn from Tutorspace and divide your acquisition methods into different channels and not just one.
Toys R Us was once the number one store in America for parents to buy toys for their children.
But during the early stages of e-commerce, they decided to make a contract with Amazon and let them handle online orders. Later on, toys r us got out of their contract, but it was apparent they just focused on the transitional stage of a customers journey. At its core, direct customer engagement is about addressing customer preference throughout the customer journey -- something Toys R Us ultimately failed to do. Leading them to be ironically out of business by the same company they fought so hard to get out of a contract within the first place.
It does not matter the size of your company or how well it is doing. If you ignore your customer and do not build some relationship even if it's not personable if they don’t feel like you care they won’t think eventually either about you.
E-commerce business has a failure rate of about 80% failure rate. Many mistakes occur when building an e-commerce business, but as an entrepreneur, you must know it is those same mistakes you need to learn from to continue in business or watch the whole e-commerce businesses fail.
If there are more case studies, you’d like to learn from so you do not face the same results and learn before ever making them go to our Startup Cemetery. You’ll want to go to the category section and click the “e-commerce” type of business.
With the help of this ultimate guide and the Startup Cemetery, you’ll be on your way to having a successful eCommerce business because as they say the fastest way to become successful is to learn from other mistakes.
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